An open letter to Puerto Rico Governor Fortuño

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I wanted to write you to discuss the condition of Puerto Rico’s economy and its municipal debt load. After I wrote a column last week entitled “Puerto Rico is America’s Greece,” I was surprised to see the piece get a lot of attention. What I said has been common knowledge in the U.S. bond market for some time, and the facts that I brought up have been previously pointed out by the major credit rating agencies. For those in municipal bond markets, I wasn’t really adding much that was new to the conversation.

But it turned out the attention my piece was getting was from people outside the bond market. Those who were responding to it were those who love Puerto Rico and are concerned about its future, namely its citizens. They seized on what I wrote and passed it around on Facebook. Newspapers like elnuevodia.com and blogs picked it up and debated the fine points of the island’s unemployment rate and deficit spending. I’ve never seen anything like it in the United States.

Now, before going any further I need to mention that I made one mistake in that piece, which I did not discover until I read the rating agencies’ reports about the commonwealth. Your constitution requires that bond principal and interest be repaid before your government can make any other expenditures. That means bond repayments take precedence over payments for education, healthcare, government-worker wages and pensions. Bond markets cheer for this, of course, but I’m not sure that your citizens are entirely aware of it. Michael Corkery of the Wall Street Journalalso wrote about your bond offering last week and didn’t mention the seniority of payments that makes your debt so appealing to investors.

Aside from that error, I stand by everything I wrote in my earlier post. If you don’t want to take my word for it, take a look at what the rating agencies have to say. They are typically pretty blunt in their assessment of the fiscal condition of states and municipalities. Here is what Moody’s said about your recent debt offering in a report on Mar. 6 (emphasis mine):

The commonwealth’s general obligation bond rating (Baa1) has been pressured by continued financial deterioration of the severely underfunded retirement systems and weak finances, with a historical trend of funding budget gaps with borrowing. Furthermore,while the administration has taken steps to control spending and move toward structural budgetary balance, needed retirement system reforms and the increasingly heavy debt load could exacerbate strains on the commonwealth’s economy and budgetary finances in the coming years.

[...]

The debt service payments were initially made with advances from the Government Development Bank and bond proceeds will be used to repay those advances. This is essentially deficit financing and follows the $600 million deficit financing in fiscal 2011.

Here is Fitch’s take on the latest financing, from a note dated Mar. 5 :

HIGH DEBT LEVELS: Debt levels are very high, partially reflecting the consolidated nature of the central government’s role, and have increased as the commonwealth has used deficit financing as part of its fiscal stabilization plan.

And on Mar. 8, Standard & Poor’s said this:

In our opinion, the practical and political ability of the administration to rely exclusively on expenditure cuts to balance the budget in fiscal 2013 is relatively limited, given the depth of the cuts already adopted, and the potential for additional expenditure reductions to hamper what remains a relatively anemic economic growth.

Many governments use deficit financing, although this is rare among U.S. state and local governments due to constitutional limitations. Deficit financing works when an economy is growing and can service higher debt loads in the future. But Puerto Rico is barely growing as islanders move to the mainland and unemployment is stuck at very high levels. Critically, the government has only saved enough funds to pay approximately 9 percent of pensions (page 184) that will be due in the future, unless substantial contributions from your overstretched budget are diverted there.

You have raised taxes to bring in more revenue, and you have reduced the size of the government. I’ve studied what Juan Carlos Pavía, the director of Puerto Rico’s Office of Management and Budget, has done to rationalize and get better control of government cash flows. These are all useful and positive actions. But it still comes down to the need for your economy to grow to support your increasing debt load. Instead, the numbers show the economy is barely growing. I’ve read in many places about a large shadow economy, but it’s hard to collect tax revenues to support bond payments from economic activity that happens outside the official sector.

Governor Fortuño, I could go on all day citing rating agencies and U.S. fund managers who do not own the debt of Puerto Rico and will not because of the instability of the fiscal trajectory. But you have already lost this war when your cronies attack me and call me names rather than engaging in dialogue on these complex issues. I’m not the enemy, Governor Fortuño. I’m like the child watching the parade who says: “Look! The emperor has no clothes.” And it’s clear to many that the emperor indeed has no clothes.

I would like to thank you for your posts and honest opinion on the economic issues currently affecting our Commonwealth. I wish more news services would take your objective facts and illustrate my fellow citizens with a reality check.

The largest problem with the PRGov is that tribalism takes over and no one likes bad news. Specially politicians running for re-election from all tribes.

It has been easier to sweep all this structural problems under the rug and tell everyone that all is fine. However the accumulated dust under the rug is so much that we can no longer ignore it. Articles such as yours illustrate this problem with hard figures that as customary don’t make it to the citizens and voters.

My last comment is to anyone from PR who may read this. When you tell a lie to yourself and repeat it over and over again. You’ll end up living it and believing it as fact. Remove the shroud from your eyes and don’t live a lie. GET THE FACTS, THIS ARTICLE HAS MANY ALL EYE OPENING.

Good reading, a lot of those things are pretty logical and are right out there in the face of everyone. Sadly a great amount of people in this country decides to ignore whats really happening and choose over their fanaticism to politics. For them what their leaders tell them its their reality.

I wish all people that live here in the Island could read your letter and maybe pay attention to our precarious economic situation. Even though these same issues have been said by other people here many don’t want to believe or recognize the problem because they are categorize as “political statements from Fortuño’s enemies”. As “puertorriqueño” I thank you and appreciate your objective and candid view.

My only regret to this letter is that it’s written in English. Most people who should read this, blindly vote for governors who pillage puertorrican values and pockets with lies and half-truths; and unfortunately these puertorricans, in the most part, don’t speak the language of their colonizers.

THANK YOU FOR TAKING THE TIME OF WRITING THIS GREAT ARTICLE, I HOPE IT OPENS THE EYES OF SOME OF THE FANATICAL FOLLOWERS OF MR MINGHOUSE AS HE IS CALLED HERE IN PR. YOU SHOULD SEE WHAT HAPPENED A FEW MONTHS BACK AT OUR MAIN UNIVERSITY.

Thanks for say the true about the reality of the economy in Puerto Rico. We have a goverment that spend the few money that we generate and produce in give contracts to the people near to the governor and in things that don’t change our lifes for better.

I live in the island, feel every day the chaos and we can say nothing because the stablishment throw the police and politics againts us. THANKS.

Hi. I feel very proud for write about the economy of Puerto Rico, but You only what its said in “paper”, I invite you Miss.Long to visit PR, and would that everything you present in your write its WORST. This administration every day lie to the poeple they want to be the next 51 state, but dint know at least the history behind the independece war of US, they said they want to be next estate 51 of US but dint know at least to speak english, mean while they siad they believe in the democracy, but you know how they react when some one step up and came with the fact. Im a student and are doing everything necesary to destroy our education and the same time our future. Please dont stop to write about this type of administration, I prefer if some inside of Puerto Rico, came up with the same objetivity but there’s no one. Thanks and dont quit.

I wish the Obama administration come to P.R. and remove these clowns from our goverment Puerto Rico is in really bad shape because Fortuño and the likes and the worst part is they are not humble enough to accept any sugestion from anyone to help fix the island economic troubles. Please Don’t stop writting these kind of articles maybe someone will do something to help us. Keep up the great work.

Mrs Cate;
I hope it was you that came to a talk show in PR to comment about your post. Just to let you know, the two commentators are lawyers and after you hung up, they dismissed your opinion for not having the expertise nor the preparation to have a clear opinion, thus the questions about your preparation and expertise. I am sorry to say that the listeners barely speak English and took their comments for granted.
This is the problem we have in the island. There is a cloak of misinformation and half truths that are keeping my people in a 21st century obscurantism.
I appreciate your comments and hope that you are better prepared to deal with these situations in the future. Diaz Olivo and Pabón Rocca are politically biased and won’t take an opinion from an outsider.
Please keep it up, we need more information of these level in the future.
In case you may ask, I am pro-independence and belief that sovereignty will give us the tools to turn this country out from Plato’s Cave.
Thanks

Respect. I was critical of your last post and the harsh allegations. You have done your research and corrected your statements regarding the security of payments towards the debt service. Great job on this follow up post.

Thank you Miss Long for exposing the truth about our frail economy. I apologize in the name of all the decent people in Puerto Rico for any attack or insults you may have received in response to your letter, but that is the “style” in which this administration reacts to criticism. Unemployment is at an all time high, but not for everyone on the island, and certainly not for Fortuño’s friends and colleagues, who have been awarded multi million dollar government contracts while tens of thousands are on food stamps and having their homes foreclosed. There is no worse blindness, than those that do not want to see.

Words with light and wisdom from a lady… yet when I talk things like this to my fellow puertorricans they look the other way saying the contraire, obviously they just repeat what our leaders say …Demagogy anyone?? Thanks Ms Long for saying the things not many of my countrymen are willing to hear or accept..hopefully they will, I just hope its not to late when we do!!

I appreciate your report, and I beleive that most of the puettorricans who undersatnd whatyou are talking about appreciate your comments and reports as well. What you pointed out, is well known in the island and unfortunately not enough has been done. The most important thing of your letter is when you mentioned that bond P&I have to be repaid before anything else is paid. I assure you that 90% of the resident of PR have no idea of the repercussion of this. And it is important that true puertorricans who love this beautiful small island understand and pass thru what could be our future in less than 10 years. I heard analyst and FAs here saying that this woukd explode in less than 7 years. That means IN 7 YEARS THERE WOULDN’T BE ENOUGH $$$ TO PAY! One last thing, governor Fortuno’s brother use to be one of the most important traders in UBS, which happens to be the major holder of PR debt and the first player in the business of underwritting in PR .., any coincidence?

I guess you must realize by now what people mean when they say Puerto Rico is subject to “political tribalism.” Unfortunately the island is divided into factions that: 1) hate each other deeply; and 2) rather sink than work together. Thus, the national consensus required to tackle the problems you point out will not materialize any time soon.

It saddens me that many educated people on this island would resort to petty finger pointing rather than rising to the challenge. Also, it is embarrassing that people would attack you personally rather than attempt to debate in a civilized manner. Nonetheless, that’s how it is on the island, critics are persecuted and tyranny is rampant.

If only U.S. Congress would answer once and for all the most crucial of questions: will Puerto Rico ever be invited to become a State of the Union? That is the question that remains open, allowing political parties to center the public’s attention on the obsessive debate over P.R.’s political status, ultimately obstructing any significant debate regarding monetary policy.

In this year of elections none of what you have talked about will sway votes. The political parties will make sure of that.

You have done a correct analysis of the current Puerto Rico Government financial condition, but also the economical situation of the common citizens in PR is in a great down turn, compared to just a lustrum ago. The decision of the Fortuño’s government in 2008 to dispose in mass of around 30,000 public employees collapsed the job security that had historically escorted that segment of our population. Those that were not fired, naturally became afraid of being the next layer to be removed, and obviously have refrained from further investment in our economy. This explosion in the heart of our main employer, the government, have had dramatic detrimental expansive effects on the private sector. And this current terrible situation of our country is being continuously denied by Fortuño and his allies, many of whom have become millionaires in three years. Inversely to reality, he is boasting in the US as the savior of the alleged “financial perils left by the former government administration”. The problem is that some people are believing the illusion being sold; they are seeing the naked emperor of the parade as very well vested.

Ms Long: It’s very interesting the information that appears on your article…we are dissapointed in the island with the Goverment of Mr. Fortuno because they took ABOUT 20 BILLIONS DOLLARS in new debt most of them to be repaid for FORTY Years (until 2052) and this is daunting…The reality is that the Governor’s wife (a lawyer) with wages of $60,000 per year goes up to $600,000 per year and they are getting richer.. but the people of Puerto Rico are suffering high unemployment rates,an increase in criminal activity and NO concrete plans from the goverment…

Thank Mrs. Long. Im frustated seeing how our goverment is spending money trying to hold on to their seats by borrowing money to satisfy their own misgivings.The problem is that both parties that have changed seats in the last 20 years have done the SAME. EVERYTHING here dances around votes and friends of the parties. I really hope that the people that vote open their eyes and look for new ideas to help get our island out of this money frenzy..recently i saw the movie Inside Job and can relate to what is happening here…THANKS Mrs. Long

Ms. Long: Thanks again for crunching numbers ,for those of us whose spheres of the brain don’t seem to quite work like those of financial wizards like you. Regarding the Caribbean mystical disciple of Hollywood cowboy Ronald Reagan a.k.a. Governor Fortuno, his problem is basically that he’s yet to realize that folks like Noam Chomsky, Joseph Stiglitz and John Pilger, live in the same planet he does. In other words, Fortuno has yet to realize that the crisis of capitalism is structural, and it is permanent. With that in mind I humbly beg forgiveness of commentators that still worship the tenets of Adam Smith and Milton Friedman, and if you fall in that category please help yourself as well. Myself, I woke up a while back and realized that neoliberal capitalism can’t do a rootin’ tootin’ thing for the future of us living in Latin America. And if memory serves right, I believe Puerto Rico being in the Caribbean, also falls under that category.

Ms.Long may have a point and it is worth her discussion to bring this up to investors and to the politicians who make these debt decisions and the citizens who will eventually foot the bill. PR is an interesting case study as it is a colony of the United States. One of last remaining colonies in the modern era. PR is dependent on the US and as she points out the wealthy in the US seeking higher returns +5% are dependent on PR debt. Plain and simple. After living and working in PR for over 15 years, most working with the Treasury Department it was pretty evident that the party was coming to an end with PR cash flow issues arising during the administration of Silla Calderon and continuing through the next administration. Fortuno has made the tough decisions, but it is an election year and no talk of austerity will be mentioned now. The general fund has been running out of funds to cover payroll in March of each fiscal year since 2004. Just look at the transfers each month to cover payroll it is like a tennis match. Don’t even ask how pensions are funded! Too many special pension laws to pay retired employees without significant increases in contributions have only depleted pension funds. But sell more assets for the common good seem to be the lesser of two evils. PR does have economic advantages, strong Financial Services sector and highly educated would be key advantages but most folks are taking the money and leaving the Island – latest census confirms this. PR needs to stop the brain drain and capitalize on its advantage to attract capital. Mind you the state department is reporting 10K new business created in PR. The only problem is how many billionaires has PR created?

Outstanding report! Thank you for throwing out there the truth about this not so true grow in the island economy. Fortuno, on his desire for a position in the federal government, lies to the people in the island. Thanks again for bringing up the real economy status.

it’s the commonwealth political system it self the fact that doesn’t allows any economic growth.

with things like the “cabotage” laws that impose significant restrictions on Puerto Rico commerce and the sovereignty relied on the US congress where PR has no vote, those are things that the states are you subjected to, so you’re statement about PR being the Greece of the state is not exactly right.

living in PR is so expensive that no millionaire person can afford to live in here, just a few like the owners of the el nuevo dia (I’m not kidding).

So as you said, “with a historical trend of funding budget gaps with borrowing”, that means that this problem it’s not a “Fortuno alone” fault…it’s more than that…is poverty by design.

I could go on all day just to conclude that Fortuno lost this war to the system as all the others before him, but I’m like the child watching the parade who says: “Look! The new emperor has no clothes…again.” And it’s clear to many that the emperors after him will indeed have no clothes, because the Senate have em’ all.

Iam speechless. Thanks Mrs. Long we need people like you that take the responsibility to say the right things in the right moment!!

The criminality,thefts, burglary, and mental health is in deprivation!! How could this Government make this kind of horribly decisions so detrimental to the people of PR.? We are living in so mental state, we cannot go outside, nor even take a tour around the island because now everyday the people are killing each other from car to car, no matter how many people are on their way.! We are afraid everytime we go to make our errands!. and now I locked myself because of thiefs everywhere.!

Ms. Long, I applaud your tenacity and veracity understanding our economies. Politicians have spent last 10 years throwing dust in our eyes with stupid and unreliable statistics. Don’t know you, but have earned my respect as a reporter. I feel sorry for my country and for those you relinquish on seen the truth. I’ve been saying that my country is on the way to become the new Haiti of the Americas. We thrive on begging for money to US, we import more than 80% of what we consume. We are not teaching or putting effort on becoming a producer country rather than a consumerist country. Our educational system still produces employees rather than employers. We don’t have an business management vision; our creativity on developing a new business or market is long gone. If global and US eyes roll to other countries to invest; let say like South America or perhaps Cuba, we are doomed.
But back to whats important; you truly stroke out Luis Fortuno. Thanks Ms. Long

As you could notice none of above comments come from anyone associated to Fortuño goverment. The explanation is those who call themselves don’t know english. Your analysis is excellent, I ask you to continue writing for our benefit. Thank you.

I can’t say I am amazed of how ridiculous Puerto Ricans act. Ms. Long made an article, and instead of people just recognizing it’s value for what is real, and what needs to be worked on, you just go and pick on her with your “facts”. Well, just so you know, I left Puerto Rico this last fall, and I am very glad. There are no jobs for professionals, the cost of living is very high and please, please don’t get me started in the potholes that have taken over like gangrene on a badly infected wound. Puerto Rico once was attractive for business and growth, and now it is an island full of corruption, deceit, and drugs. As long as everyone in PR keeps playing the game of being the political fanatic, if it’s Red, Green, Orange, or Blue, no one will get their act together and work. Also the amount of lazy people is incredible, and yes that is due to benefits acquired by the US Government, but any individual can choose to work hard and earn their living instead of living of the government and the “mantengo”.
For now, I moved to the states, I am very happy, and would not move back to Puerto Rico. I suggest the same for anyone that wants to improve their quality of life, and grow. All others, enjoy the island!!!

Dear Mrs. Long:
Thank you very much for your report. I will try to make my opinion in an objective way. It may be true all the facts that you present on your article. The thing here is how you present them. If you name your article “Puerto Rico is America’s Greece”, you cannot pretend to receive flowers back from the people that are struggling some way to get things better. If you really want to help the people of Puerto Rico and you consider yourself as an expert in these things, then you should present some solutions that can help the government of PR following your complaints. Is kind of easy to make some research and just criticize what’s wrong. So I will really appreciate that you bring us some solutions or what you had been done instead if you were the governor of PR. Mrs. Long, these are the things that will really help. So I will be waiting for an article named something like “If I were the governor of PR”.
Thank you very much!

Dear Miss Kate Long:
Kate, I wish you could continue writing, looking for this open eye facts about the current irresponsible government. Here is a quick fact, Fortuño took his annual salary of $70k-$100 and reduce it by at least 5-10%, but his wife salary went from $250 to almost $500k per year. Their annual tax returns where made public to anyone who wishes to read/analyze/, but no one has made an argument, describe previously in message.

Dear Cate Long;
Thank you for this eye opening report that should be published in all the newspapers in my country and talk by the entire political analysts in my beloved island. Sadly, the government control most of our newspapers and media and this article will fade into history. Also, I would like to add to the financial situation, that you so brilliantly report in this article, the government corruption, social inequalities and massive exodus of puertorricans professionals to the US due to lack of jobs in this country that was recently report in the USA today article; not even Superman will save the economic debacle in this country.

As a Puerto Rican I totally agree with your article. I’m not trying to make a discussion from the topic to other fellow Puerto Ricans, but as I say, I agree. But the problem, I think, is that maybe people here don’t look at statistics. Well, the majority of the population,which are not highly educated (by that I meant they only have Associate’s or Bachelor’s, which is not that they are uneducated) don’t know about that. They just believe what they are told. And the politicians here are just good at making promises…..That doesn’t mean that we are ignorant; it means that we are very faithful. Not all people are willing to destroy the mediocrity of the politicians, but we are willing to work for our pride. The problem is that the ones who want to make a change have to fly away from this precious land that we have to ensure a better chance. Plato said: “One of the worst punishments for not participating in politics is ending up ruled by men inferior than yourself.” Also, another wise man, Sir Francis Bacon, said: “There’s nothing that can do more damage to a nation than clever people passing for intelligent.” Personally, I’m tired of that, but I don’t know who else can see the emperor has no clothes, other than myself? One voice can raise the alarm but if the others just sit and wait, nothing’s going to happen. I’ll will be another one who just flew out of the sadness and the awful reality of the enchanted island who turn out to be the opposite, as I’ve heard some Americans said… Sad but true! And even if I want to make the difference, I will be all alone because may be no one else raise their voice because they are afraid to be losing what they have (the ones that work), or losing their commodity (the ones that live entirely on welfare and don’t want to change a thing), or the ones who have money and doesn’t want to lose their “bussiness” that are attached to what politics are in power. People keep trying to block the Sun with the finger, but for how long? I think you hit the jackpot, at least one of the four big columns, but the REAL problem is bigger than that.
(BTW:I don’t have any political affiliation, since I think they are all of the same cut. Stupidocrats!!!)

I appreciate somebody, at least, raise her voice against the pathetic leader that Puerto Rico has as governor. I hope it won’t be the last time somebody with intelligence just shut their mouths and their senseless words of a jester!!!!!

This bit at the end also caught my attention: “I’ve read in many places about a large shadow economy, but it’s hard to collect tax revenues to support bond payments from economic activity that happens outside the official sector.” Considering how easy it is to collect taxes on illicit drugs via sales tax, it seems likely that the IVU sales tax institutionalized by the previous governor intended to reap from the illegal drug trade. If only we could know what percentage of IVU revenues comes from drug trafficking at all levels, as the illegal drug trade may well be keeping the economy afloat. Not to mention money laundering by local banks and businesses; some retail businesses are so obviously fronts that anyone with a whit of street creed can tell by merely walking or driving by. Easy but oh so dirty source of government revenue considering it’s someone else’s kids who get killed like dogs in the street every single day. Though it probably gets wasted by being redirected back at the drug trade for a police force notorious for its civil rights abuses (the largest force in the US other than New York City at nearly triple the population). The Fortuño administration is a disgrace, and the main opposing political party doesn’t offer much by way of alternatives, a tragedy of epic proportions, especially painful for those who love Puerto Rico.

Puerto Rico has a combination of factors that made this bury moment the perfect storm. High unemployment, bonds emission without considering future leverage, high interest rate, long term maturity of debt, government expenditure above the minimum rational responsibility, political parties establishing contracts with the absent of pertinent evaluation, Corruption; is clear… the end it’s near..!

Puerto Rico has a combination of factors that made this bury moment the perfect storm. High unemployment, bonds emission without considering future leverage, high interest rate, long term maturity of debt, government expenditure above the minimum rational responsibility, political parties establishing contracts with the absent of pertinent evaluation, Corruption; is clear… the end it’s near..!

Thank you, from the bottom of my heart Ms. long. I am 21 years old, born & raised in this Trujillo Alto and it was about time someone gave this government a slap in the face.

My only regret is that this article has not been written in spanish because most of our people will not be able to understand it. If no one has taken the time to translate this, with your permission I will. Also i will promote this all over Facebook in hopes that the people living here open their eyes to the truth that they have for so long ignored.

Now I know this is none of your business and you were just discussing our economic situation, but by writting this not only have you accurately described whats going on in our local economy but furthermore you have given hope to few, including myself, who thought all was lost.

I wish for a better Puerto Rico and Im expressing myself for one reason… Anyone who reads this and understands the consequences that we will be facing anytime soon thanks to what our government has done all these years (Both political parties), should DO SOMETHING ABOUT IT.

Its about time this jerks in our goverment pay for all the damage they have done to our people… Thank you once again Ms. Long, I trust that this will not be the last time the puertorrican people hear from you.

The past three or four administrations, the only thing that they have been doing is throwing mud back and forth, making themselves rich, making promises that they can keep, and for a few lucky ones making reservations in the now full “Cataño Hilton”; the local federal penitentiary. While the native capital erodes, unemployment raises, exodus increases. Government agencies are a rat nest, filled with corruption and inefficiencies. On my part if I had to do it again (my last 25 years) I would move someplace else. Just now picking up the pieces and praying to the Almighty for a miracle and to protect our youth from being physically being murdered.

Thank you very much for your accurate and thought provoking article. Unfortunately, many fellow Puerto Ricans either do not know these facts or simply ignore them. I am not surprised that you were attacked by the Governor and his friends when you wrote the first article. See, that is their “modus operandi”; they attack and destroy every person or every institution that raise their voice to criticize Fortuño’s government. Fortuño’s priority is to get his friends’ pockets with millions and leave Puerto Rico in shambles. Thank you for making the US and the world aware of this situation.

The only piece of information I do not completely agree on is when you said: “But Puerto Rico is barely growing as islanders move to the mainland…” See, I moved to the US ten years ago for the same reason: I couldn’t find a job in the island, even though I graduated from the best university in the island: “Recinto Universitario de Mayagüez.” I think Puerto Rico is barely growing because their is a lack of reforms to create jobs and keep educated people, like myself, in the island. I know live in Europe, but I hope that my fellow Puerto Ricans start reading articles like this and digging deep to get out such a suppressing government and start anew.

Hi all, thanks for this article. I think Puertoricans are awesome every four years no matter what color finding defects on the government wich is in fact since marin and before on a bad track. Now I would like to suggest because this has been the same for over 32 years ive been living can we get to the point were this intelectuals get to the solution writing and not just say the idea but actually roots for it and makes the changes necesarry to create the economy. I guess with all the selling signs, bankrupcies and high level of criminality it is obvious we have a crisis. The ones that state that this is this administrations or past administrations fault are blind. The root cause of this problem is simple: WERE STUCK IN AN ISLAND THAT DOES NOT MANUFACTURE OR CREATE MORE THAN WHAT IT CONSUMES FROM THE EXTERIOR. Its not the government fault we are consumerist of everithing out of our island and the private sector people (US THE PEOPLE) do not take action to help create a solid economy. We must stop pointing fingers and instead point to what we can do and again not just ideas but actual work behind those. That way when you start doing something about it Cate and you have a bunch of people to criticize you instead of supporting progress wellp you will really understand what PR is about.

Cate, your presentation of Puerto Rico’s financial predicament is well presented. But, sadly, biased. There’s another presentation of PR’s financial position by Newsmax. Maybe they’re biased, too, but it’s nice and smart, to hear from the other side.

Excellent post, Ms. Long. In addition to the rating agency reports, the research team of the UBS Wealth Management division in New York City published a thorough report on the Commonwealth’s finances on January 11, 2012. I suggest you take a look at it. One of their findings is that “current spreads for many Commonwealth borrowers do not fully reflect the unresolved credit issues and we expect more downside than upside momentum to the credit for now.” This is a diplomatic way of saying there are some deep structural problems with Puerto Rico that have not been yet addressed and which are not fully reflected in the market prices for Puerto Rican bonds.

Ms. Long, I was one who posted on your first writing and I want to make clear that I am not in disagreement with you. Who I took issue with was Mr. Shraeger’s comments. Now as far as the rating agencies go, it is obvious that even the Federal Government is no longer paying attention to them. What has to be understood by all of this is that this economy is actually The Federal’s Government’s doing. What’s on the PR Constitution it was the Federal Government who installed it into it’s wording. What Governor Fortuño is guilty of is going along with what the Federal Government wanted , which was for PR to continue to borrow. If you study the history of his path to the Governorship you will see that it was with the Federal Government’s backing as his competitor, the ex Governor Acevedo Vila, was not in agreement of this practice and he was charged with trumped up charges to get him out of the way. This is why I say that the ratings agencies pick on the wrong people for it’s way on how to get to their ratings. Based on this I continue to reiterate, the US will let go of Illinois and California before it let’s go of Puerto Rico.

Excellent Ms.Long. There is only one thing missing and it is that you should have posted this letter in spanish in any media in PR. As it is it does not reach a great majority of our fellow puertorricans either because of the language or because many do not have access or know about your blog. Your letter should have had an enormous impact if our people in this blessed island would had the oportunity to know about it. Most of the incidents abroad concerning us our local media screen them and we rarely are aware of who says what.

This Fortuño guy is the same who when in meetings with the Koch Bros says he despises Obamacare and when in Puerto Rico he praises it. And one thing perhaps you did not know, this poor republican thing pays a Washington guy with Puerto Rico’s taxpayers money to promote him among republicans in the mainland… He can’t govern Puerto Rico and still has presidential dreams (sorry, delusions).

Thank You Cate, we need outside people like you to watch over these Randian/Kochian crooks.

Now, seriously speaking, it is very refreshing to have someone tell the truth with no hidden agenda. The government here portrays somewhat different although many of us know how deceptive they are and can be.

I think you are very courageous and allow me to congratulate you for your integrity and verticality. Keep on the good work!

I would like to congratulate Mrs. Long for her telling the people of Puerto Rico that their “King” is naked. Gov Fortuno gained power by promising NO LAYOFFS, to reduce the crime rates, lower cost of living, lower price of gasoline and that we would not privatize.

Yet,as soon as he won he planned the layoff of more than 30,000 Heads of households, he implemented 19 NEW TAXES, He raised “turn-pike” tolls, and then privatized them, He has worsened the debt of PR for future generations and yet almost a million ignorant fools DARE NOT SAY THAT THE KING IS NAKED!!

The issue was not what steps he took to implement his FAILED Reaganomics, the problem we have in PR is that he LIED when asked if he would do what many knew he would do (since he is a “wannabe” REPUBLICAN/TEA PARTY MEMBER)…

My salute to a valiant woman, reminds me of my mother who wouldn’t keep quite in times of tiranny..

Interesting that after we saw governor Fortuño trying to kill the messenger, no pro-statehood sympathyzers have left any messages in this forum or supported their suck-up governor. Betcha they haven’t because they don’t understand English. And they want to be a federarated state. Really?

Your article is intelligently written and you describe the situation as it is now, although some economist and other financial analyst might disagree with you in some areas. Assuming that you have no hidden agenda to make the current admisnistration look bad, you paint a clear picture of the economic problems that Puerto Rico has today. But we all know that all the World has economic problems. What you fail to do, and many inquire as to why, is to attest to the fact that Puerto Rico is in much better shape that it was since this administration took office with its fiscal responsability attitude. Your article would have been better in my opinion if you would have commented on the past 3 year trends.

Thanks Ms Long for the information.But i wondering after 100+ years puertorican being a colony of US and treat our country like a hungry indians with no knowledge and no future. Let Puerto Rico go. They don’t need you, they don’t asking for your help. Is time to let them know, Politicians in the United States Congress, Puerto Rico doesn’t need United States to survive. It’s time to let them go and focus effort to help the people living in the states. They don’t want United States in Puerto Rico. The Puerto Rico Commonwealth need to finish,this status doesn’t help, more than 30% of people live from wealfare and goverment help, you don’t built a country like that…….it’s time Puertorican people take a new horizon like a Nation. They just only need want sesion in the US Congress to change the Law about Puerto Rico because,this Puerto Rico in the US Congress a Law can derogate in one session of the US Congress. IF you really worry about Puertorican people, HELP THEM FINISH THE COLONIAL STATUS………………THANK’S

Great article and welcome to the world of Puertorican politics. The other secret that the Governor has kept from you and the bond markets is that he has substituted does layoffs with private contracts . The savings are Enron type accounting gimmicks. Also, technically the government is broke and broken. They have had several asset sales in the past. Most recently several toll roads and in the past the PR Telephone Co. Both of these assets were revenue producing businesses. The funds from the telephone sales are long gone and am sure the Toll Road deal is soon to be swallowed by the deficits or are collateral for bonds. I anticipate thatbthe next asset sale will be the Electric Co. If that happens then the island will be in a world of hurt. There are a lot of government agencies and municipal governments that have unpaid electric bills and that wouldn’t happen under a private electric company.

I truly think the commentators in Reuters and the other sources that you mentioned do not comprehend what you mean about the banks being in the front of the line. The owners of the bonds are lien holders of the island’s future revenue. If revenues do not increase, they will take it out of the operational budget and require sharper cuts in government expenditures. The real pain for Greece has been the large cutbacks in government spending (retirement benefits and jobs) and that is due to the debt repayment requirements from the ECB. Now that is in PR’s near future.

Puerto Ricos problems won’t be solved by tweeking the economy and calling for more unsustainable growth. This applies particularly to an overpopulated island with diminishing natural resources and a public increasingly dependent on handouts. Until the roots of the problems that affect so many countries, overpopulation and extreme wealth and power concentration, governmental fixes will amount to sticking bandaids on hemorrhaging wounds.

It is a shame .. in what has become my country. It remains to echo the words of Ms. Long if you are Puerto Rican knows that the crisis is growing .. Where the government instead of helping their citizens to put greater burdens on their shoulders than they can carry .. more taxes, fewer benefits, fewer jobs ..
Has increased costs of basic services, food, electricity, water, gasoline but unfortunately the salaries are equal and not see another boost for a long time as well .. we say in my Puerto Rico: undressing a saint to dress another ..
and the government taking its toll on its citizens for their mismanagement ..

I honestly think you should quit taking money from lobbyists from the Popular Democratic Party in Puerto Rico. Your column is so bias that even when you recognize the actions taken by Luis Fortuño’s administration to righten the mess left by previous administrations you do so “con las muelas de atras”, or against your will. I encourage you to use your new found fame to advocate for the rights of all the american citizens living in Puerto Rico to finally determine that we no longer want to be the oldest colony in the world because in our case it’s not “the economy stupid” it’s our political status that no longer provide for growth. Next time, please get your facts straight.

I’m personally not aligned with Fortuño’s Republican economic ideals, but I’m trying to be fair here. You mentioned that Fortuño and his cronies were attacking you and provide a link to an article. You may have more evidence for saying this, than what we know, but I fail to see where in that article you are being called names. Sure, they say you supposedly have an agenda to criticize Fortuño’s decisions and government, but I see nothing that would be that offensive. It’s in Spanish so I don’t know if you read or had someone translate accurately.

Additionally, you must know that anyone can write and post on a website and that doesn’t necessarily mean it’s been done in coordination with Fortuño or his campaign. Do you have some evidence of Fortuño or someone close to his political campaign referring to you inappropriately? I’d be good to know what prompted you to write an open letter to the Governor.

You should know that politics here in PR usually leads to heated discussion, and most of the time it’s driven by fanaticism rather than by careful consideration of facts. Some of the posts you see here are, as you may have seen, an example of that and should be taken with a grain of salt.

Author Profile

I’m Cate Long and I write about the retail fixed income markets including municipal bonds. My primary interest is creating tools and systems to help retail investors understand bond markets. I’ve worked for a number of years with industry standards organizations, regulators and Congress to help craft a more transparent and fair framework for investors to participate in the fixed income markets. I'm a guest contributor to Reuters.com. Any opinions expressed are mine alone.